| Your 401k best investment strategy for 2010 | | | | your growth engine for making higher profits over |
| and beyond depends on the investment options in | | | | the long term. Hence there is risk here. |
| your 401k plan. Regardless, with a sound | | | | As you get older your target fund automatically |
| investment strategy any 401k investor can be a | | | | adjusts to a lower risk profile. You don't need to |
| winner. Few people understand investment | | | | change a thing. The stable account offsets your |
| strategy or their investment options, so here we | | | | overall risk because it is safe and pays interest. |
| make it simple for you. | | | | Together, these two investment options give you |
| Millions of investors lost money in the "lost | | | | a balanced portfolio offering you a higher return |
| decade" of 2000 through 2009. It was a tough | | | | at only a moderate level of risk. Now, in extreme |
| time to invest. Without a simple yet best | | | | circumstances as in 2008 and 2009 portfolios get |
| investment strategy in 2010 and beyond, investor | | | | out of balance due to extreme fluctuations in the |
| losses could continue to pound the uninformed | | | | investment markets. |
| 401k investor in the future. So, let's start on page | | | | That's why it is extremely important to go for |
| one and put together a sound investment | | | | the auto rebalance feature in your plan. For |
| strategy for people who know little about | | | | example, you might elect to have your |
| investments and investing who invest in a 401k | | | | investment portfolio rebalanced once a year at |
| plan. | | | | the end of each year. In our example that would |
| First, look at the 401k investment options AND | | | | mean that once a year your plan would move the |
| features available to you. If your plan offers | | | | money in your 401k account between the stable |
| TARGET funds, a safe STABLE ACCOUNT, and a | | | | account and target fund so that ½ was |
| REBALANCE feature you've got it made. If not, | | | | again in each as you had originally intended it to |
| you'll need to work a little harder to maintain a | | | | be. |
| balanced investment portfolio... the secret to long | | | | Example: At the end of 2008 your target fund |
| term investing success. We assume here that | | | | would have lost money for the year, since the |
| you want to be a moderate or middle-of-the-road | | | | stock market tumbled; and your stable account |
| investor. In other words, you want to put your | | | | would have grown. Auto rebalance would have |
| money to work to make a better return without | | | | taken money from your stable account at year |
| taking much risk. | | | | end and put it into your target fund to make |
| Let's start with the easy way: your plan has | | | | them both equal again. At year end 2009 you had |
| target (retirement) funds, a stable account that is | | | | a nice profit because stocks (and your target |
| safe and pays interest, and a rebalance feature. | | | | fund) had a good year. At that point rebalance |
| First pick your target fund. For example, if you | | | | would again kick in and move funds from the |
| plan to retire in about the year 2040 pick target | | | | target fund back to the stable account to even |
| fund 2040; or target fund 2020 if that's when | | | | things up again. |
| you expect to retire. Now set things up as | | | | If your plan does not have a stable account, |
| follows: ½ of your new contributions AND | | | | substitute with the money market fund option. If |
| ½ of your existing fund investment assets | | | | target funds are not offered go with stock funds |
| (money) goes into your target fund. The other | | | | and bond funds. If auto rebalance is not available |
| half goes into the stable account. Then, elect to | | | | do it yourself by moving money once a year to |
| participate in the automatic rebalance feature. | | | | put things back in line. For example, set yourself |
| It's that easy to put what I consider to be your | | | | up with ½ going to the money market fund |
| best investment strategy into action. Here's how | | | | and the rest split equally between bond funds and |
| it works. Your target fund works to make your | | | | stock funds to be conservative. To be more |
| money grow by investing primarily in stock funds | | | | aggressive go 1/3 each in the money market |
| and bond funds with the remainder in a safe | | | | fund, stocks funds and bond funds. |
| money market fund. It will fluctuate in value and is | | | | |